How much do you know about life insurance companies? Do you rely on the information given to you by life insurance agents or do you do your own research? Why is it important to know some things before you buy a policy?
Well, we are here to give answers to all your life insurance queries.
Today we are going to tell you 6 life insurance secrets that companies don’t tell you. If you really want to get a nice deal for your money, you should know these secrets. And trust me, you will be surprised after reading them.
At LifeQuote, we believe in building an honest and long-term relationship with our clients. This is why we feel obligated to let you know some of these secrets that big life insurers don’t like to disclose.
Life insurance industry is a big business. As of 2017, there were a total of 781 U.S. life insurers. However, in 2018 the industry as a whole faced a significant decline. This is because consumers nowadays are well informed, and they are not easily trapped with sweet wordings and promotional tactics of these life insurance agents. They are savvy and technologically advanced. They search online to find a better price. And there is nothing wrong with this. It is your right to save money and get a good quality product even if its a life insurance policy.
Life Insurance is a magical tool
You work hard for your money. You also love your family and think about their financial future. We don’t say that life insurance is a necessity, but we do say that it is a magical financial tool that can replace your income if you are not around. It is a product that can help your family pay all of the following when you die:
- Pay off bills (mortgage, credit cards, auto insurance, car loan)
- Pay for kids college
- Buy business share
- Pay for medical bills
- Pay for funeral costs
- Pay off final medical expenses
- Pay for your kids’ wedding
If you have been able to save enough for your survivors to pay all of those bills, then you don’t need to buy life insurance anymore.
Best Kept Secrets of the Life Insurance Industry
Here are some life insurance secrets you need to know so you can be a savvy customer.
- Three ways to lower your life insurance premiums
- Low-cost quotes are only for people who qualify for a “Preferred Plus” rating
- Life insurance companies pay higher commissions to agents to sell their products
- Life insurance companies don’t like to give payouts
- Permanent life insurance is not a good investment option
- Modern no exam policies can be just as affordable as the typical policies
#1 Three ways to lower your life insurance premiums
- If you have a permanent life insurance policy for a good number of years, it must have built up a significant cash value now. You can use this cash value to pay your premiums. Keep in mind that reducing the cash value will lower the death benefit amount unless you pay it back.
- Another money-saving life insurance secret that you should know is:
Reducing the amount of death benefit = lower premiums
Most life insurance companies will lower your premiums in exchange for a reduced death benefit amount. If your death benefit amount is lowered up to a certain amount then your carrier may consider your permanent life insurance policy as “paid up” and you can stop paying your premiums entirely.
- Switching from permanent life insurance to a term life insurance can also help you save a lot. Discontinue your permanent life policy, take the cash value and use that money to buy a cheaper term policy.
#2 Low-cost quotes are only for people who qualify for a “Preferred Best” rating
You may have seen many big companies touting rates as low as $9/month for a term life policy. What they don’t tell you is that these low rates are only given to applicants who qualify for “Preferred Best” class. These applicants are young and perfectly healthy with no risk factors such as family history of the disease.
The truth is that only 5% of applicants qualify for a “Preferred Best” rating. Rates increase by 20% to 30% when you are classified in a class below “Preferred Best.”
#3 Life insurance companies pay higher commissions to agents to sell their products
Agents associated with a particular life insurance company are offered higher commissions to sell products. So whenever you see agents trying hard to sell you a permanent life policy or an annuity then it’s just because they are getting more through the sale of that product.
Agents don’t get much on selling term life insurance but, to be honest, a term policy is the best purchase for an average American looking for life insurance.
This is the reason, we advise our readers to shop online and contact independent agencies like LifeQuote for their life insurance needs. We are not associated with any one company nor do we get high commissions on selling any particular product or policy.
#4 Life insurance companies don’t like to give payouts
Life insurance companies do not put effort into looking for beneficiaries who have not yet been paid. Therefore, it’s important to let your beneficiary know about the policy. Tell them you have a policy in force and where they can find it in case if something happens.
>> To know more about naming life insurance beneficiaries, you can read our post here: Understanding life insurance beneficiaries
#5 Permanent life insurance is not a good investment option
Many life insurance companies and agents tell you that buying permanent life insurance is a wise choice as it helps in accumulating cash value, but actually, it’s not.
The cash value accumulation does not start as soon as you buy the policy, It takes 5 years or more to build any cash portion of the policy.
The first year payments of your policy are used to pay the agent’s commission. Then in the following years, a good amount of your premium money is used to cover the death benefits portion of the policy as well as the administrative fees.
Keep in mind that administrative fees will always be there. Many life insurance companies are very secretive about these costs.
That is why we recommend buying term life insurance and investing the rest.
The cost of permanent life insurance vs. term life insurance:
A healthy 40-year-old non-smoking male can buy a 30-year term policy with a $500,000 coverage amount for around $336 per year. Buying a Whole life policy (permanent life insurance) for the same amount i.e. $500,000 would cost approximately $7,312 per year.
That’s an annual premium difference of $6,976 per year!!
#6 Modern no exam policies can be just as affordable as the typical policies
Traditionally, it was thought that if any of the following conditions applied to you, it might be worth looking into a no-exam life insurance policy:
1) You have “high-risk” health concerns, such as diabetes or smoking
2) Other insurance companies requiring a medical exam denied your application
3) You have a high-risk occupation or hobby
4) Your employer does not offer life insurance
That’s no longer the case for the most affordable type of no exam life insurance. Today it’s more likely that a candidate will qualify for a no medical insurance if they’re in really good health, and therefore pose a much lower risk for insurance companies to provide coverage without the benefit of a medical exam.
How Can An Independent Life Insurance Agent Help?
LifeQuote is a pioneer in online life insurance industry. We excel in providing quality service to our clients with no hidden agenda.
We strive to form long-lasting relationships with our clients by providing them with the most suitable life insurance product at the most affordable rates!
With access to over 40 top life insurance companies, we will help you find the best in no time. Let us do the hard work for you at no additional cost on your end. Give us a call today at (800) 521-7873. We are here to help.
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